At an extraordinary session, the National Bank of Serbia (NBS) approved a decision to temporarily limit interest rates on loans. This decision aligns with the provisions outlined in the Proposal for the Law on the Protection of Users of Financial Services, which will be discussed during the first session of the National Assembly next year. The primary goal is to protect the financial stability and living standards of housing loan users.
As previously announced, the interest rates on housing loans will be reduced after this temporary measure expires in 2023. The NBS decision temporarily limits interest rates to 5% until the adoption of the Law on User Protection, which is expected to be completed by the end of 2025.
The decision specifically restricts interest rates on existing and new loans with variable interest rates to a maximum of 5%. Additionally, new loans with fixed interest rates are capped at 5%. Currently, the effective interest rate, which includes all associated costs (such as insurance, notarization, mortgage registration fees, etc.), is limited to 6.65%.
This measure aims to ease the transition to market interest rates once the temporary limit expires. Without this restriction, the average interest rate for variable loans would be around 5.63%. The temporary cap of 4.08% was introduced when the EURIBOR reference rate was on an upward trend and reached a peak of 4.1% in October 2023. Since then, EURIBOR has decreased, with the 6-month EURIBOR currently standing at 2.6%. Given this downward trend, it is expected that many loans will see their contracted interest rates drop below 5% by the end of 2025.
In addition to the limits on housing loans, the NBS has also set interest rate caps on cash and consumer loans. The nominal interest rate for loans issued in dinars cannot exceed 14.75%, and the effective rate, including all costs, is limited to 15.75%. For credit cards and overdrafts, the effective rate is capped at 17.75% and 19.75%, respectively. This represents an immediate one-third reduction in overdraft rates for all users.
This decision reflects the NBS’s continued commitment to protecting financial service users. The NBS is also expecting the adoption of the new Law on the Protection of Users of Financial Services during the National Assembly’s first session next year.
